Verus Capital Ltd as Manager of Benwood Property Trust and Australian Securities and Investments Commission - [2001] AATA 864

DECISION AND REASONS FOR DECISION [2001] AATA 864

ADMINISTRATIVE APPEALS TRIBUNAL      )           No N2001/401
GENERAL ADMINISTRATIVE DIVISION          )
           Re      Verus Capital Limited as Manager of the Benwood Property Trust
  Applicant
           And    Australian Securities and Investments Commission
  Respondent

DECISION

Tribunal Mr R P Handley, Deputy President

Date16 October 2001
PlaceSydney

Decision The Tribunal sets aside the decision under review and reinstates the decision made by the Respondent on 30 June 2000 pursuant to s 1454(2) of the Corporations Law extending the transition period until 30 June 2003.

............................................
Mr R P Handley,
Deputy President
CATCHWORDS
CORPORATIONS – Managed Investments – transition from prescribed interest scheme to managed investment scheme – where two year transition period applied - where Respondent exercised discretion to grant three year extension - where Respondent subsequently decided to reduce extension – whether Applicant convened meeting of unit-holders pursuant to s 1457(1) of the Corporations Law
COSTS – Power of the Tribunal to award costs in corporations matters

Administrative Appeals Tribunal Act 1975 s 69B
Corporations Act 2001 ss 58AA, 58AA(2), 1317B, 1317C, 1331, 1332, 1333, 1335(2)
Corporations Law ss 109ZB(5), 601QA, 1452(2), 1457(1)
Managed Investments Act 1998

ASIC Policy Statement 135, Managed Investment Transitional Issues

Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

REASONS FOR DECISION

Mr R P Handley

This is an application by Verus Captial Limited as Manager of the Benwood Property Trust ("Benwood") for a review of a decision of the Australian Securities and Investments Commission ("ASIC") made on 9 March 2001 to vary an instrument dated 30 June 2000, so that the extension of the transition period granted by the instrument be reduced to a period ending on 30 September 2001 instead of 30 June 2003.

At the hearing, Benwood was represented by Marc Amour, the Managing Director of Verus Capital Limited ("Verus"), the Manager of Benwood, and Kim McGrath, also of Verus Capital Limited. ASIC was represented by Andrew Moore, Lawyer of ASIC. The evidence before the Tribunal comprised the documents produced pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 ("the T Documents"), together with other documents filed by Benwood ("the Benwood Documents") the parties. A Statement of Agreed Facts was submitted by the parties prior to the hearing.

BACKGROUND

Benwood is a listed property trust whose principal activity is the realisation of approximately 4.9 hectares of land at High Wycombe, Perth, through the sub-division and sale of 19 lots, promoted as constituting a business park.

Although initially established as a private trust, Benwood became a public trust in 1984 when Perpetual Trustees W A Limited ("Perpetual") became the Trustee. Verus became the Manager of Benwood on 17 September 1997. Benwood comprises 6,864,000 full paid ordinary voting units held by approximately 350 unit-holders. Other than unit-holders associated with Verus, Benwood's unit-holders are mainly retail investors.
The High Wycombe property is not income producing at present as it comprises vacant land. Benwood relies on finance from Suncorp Metway Limited (commenced 20 December 2000) for expenditure in relation to the sub-division of the land. The total facility is of $1.6 million secured over the High Wycombe property and all other assets of Benwood. Money borrowed from Suncorp Metway will be repaid from the sale of the sub-divided lots in the property.
Changes in the Corporation Law as a result of the Managed Investments Act 1998, took effect on 1 July 1998. The Managed Investment Act amendments established a new regulatory regime for managed investment schemes, which had previously been regulated as "prescribed interest" schemes. The Managed Investment Act amendments required all prescribed interest schemes to transition to the new regulatory regime within a period of two years from commencement of the amendments on 1 July 1998. However, provision was made in s 1454(2) of the Corporations Law for ASIC to extend the time for compliance beyond the two year transition period if certain criteria were met. Sub-section 1454(2) provides:
ASIC may extend that period of 2 years if the undertaking is to be wound up at a fixed time after the two years and ASIC thinks it would be unreasonable to require the undertaking to become a registered scheme before being wound up.

ASIC has formulated policy to guide the exercise of discretion in relation to extension of the two year transition period under s 1454(2).

The transitional provisions in Chapter 11 of the Corporations Law set out the process by which a trustee or management company can retire from management of the prescribed interest scheme by giving a written retirement notice. If neither body gives a retirement notice during the first year after the commencement of the Management Investments Act amendments, then the management company must, pursuant to s 1457(1):
(a)     as soon as practicable after the end of that year, convene a meeting of the         holders of the prescribed interests to:
(i)choose a proposed responsible entity for the purpose of making a registration application; or
(ii)       decide that the undertaking is to be wound up; and
(b)       lodge a notice with ASIC setting out the outcome of the meeting.

By letter dated 9 May 2000, Verus applied to ASIC for relief from the new managed investments regime. There followed some correspondence between the parties before Verus' solicitors, by letter dated 1 June 2000, amended the request for relief by seeking a three year extension to the transition period of two years pursuant to s 1454(2). The letter indicated that the manager, Verus, proposed a meeting of unit-holders to consider a resolution to convert Benwood to a "fixed term trust terminating on 30 June 2003". If such a resolution were passed, corporatisation of Benwood's structure would then proceed in the period prior to the termination date.
On 29 June 2000, at a meeting of Benwood unit-holders, a resolution was passed converting Benwood to a fixed term property trust terminating on 30 June 2003. On 30 June 2000, ASIC granted unconditional relief to Benwood pursuant to s 1454 (2) extending the transition period until 30 June 2003.
By letter dated 2 November 2000, ASIC advised Verus that ASIC was minded to review this relief and invited Verus to respond by 23 November 2000. On that date, Verus' response, dated 23 November 2000, was received by ASIC. There was no further communication between the parties until 9 March 2001, when ASIC faxed its letter of that date to Verus, informing Verus that it had varied its decision of 30 June 2000 by reducing the extension of the transition period from 30 June 2003 to 30 September 2001. The effect of this decision was that Benwood was required to comply with s 1457(1), and if neither the management company nor the trustee intended to seek appointment as a responsible entity, then the management company (Verus) had to convene a meeting of unit-holders not later than 30 June 2001 with a view to paragraphs (a) and (b) of s 1457 (1) being complied with by 30 September 2001.
On 30 March 2001, Benwood applied for a review of the decision of 9 March 2001 by this Tribunal and, on 30 April 2001, the Tribunal stayed ASIC's decision of 9 March 2001.
APPLICANT'S SUBMISSIONS
Mr Amour said that transition to the Managed Investments Act regime would be likely to cost Benwood in the order of $60,000 to $100,000. He said that Benwood is only a small listed property trust, its principal asset being the land at High Wycombe. With the sub-division of the land and progress towards sale of the sub-divided lots well in hand, it would disadvantage the unit-holders if Benwood had to comply with the terms of ASIC's varied order. For example, if the option to wind up Benwood were pursued, this would trigger a default on the loan agreement with Suncorp Metway with a result that all outstanding money owed to Suncorp Metway would immediately become repayable.
In Mr Amour's opinion, a move towards the winding up of Benwood would also be contrary to the duties of the directors. Benwood still intends to corporatise or convert to a managed investment scheme before 30 June 2003, but Benwood should be able to rely on ASIC's original decision of 30 June 2000 in organising its affairs within the extended timeframe. Mr Amour noted the comment made by Darren McShane in an email message on 12 December 2000 (T57) to the effect that the original three year extension having been granted, it might be unfair to now take that extension away. Mr Amour said that negotiations for the loan facility from Suncorp Metway commenced in about May 2000. Given Mr Amour's response to Ed Goodwin at ASIC by letter dated 23 November 2000 (T55), after which Mr Amour spoke to Mr Goodwin who agreed to contact Mr Amour if any further information was required, Mr Amour was under the impression that when he heard nothing from Mr Goodwin that the issues raised by ASIC had been answered satisfactorily.
Mr Amour also referred to an internal memo by Peter Hewitt of ASIC dated 27 October 2000 (T47) where Mr Hewitt suggested that the interests of unit-holders would be sufficiently protected if the original order were allowed to stand. Mr Amour noted the divergence of views between ASIC officers.
Mr Amour referred the Tribunal to a press release by the Minister for Financial Services and Regulation dated 6 August 2001 (Benwood Document 31), announcing a review of the effectiveness of the arrangements for the regulation of managed investments introduced by the Managed Investments Act 1998. The press release notes the outcome of a study by ASIC of 83 Responsible Entities operating between July 2000 and June 2001. These 83 Responsible Entities represent 19% of those operating at 30 June 2001, and the study revealed breaches or compliance failures in 69 of the 83 Responsible Entities examined. An article in the Sydney Morning Herald dated 4 June 2001 (Benwood Document 28) states that the trustee industry welcomes the review.
Mr Amour said that since Verus took up its position as manager of Benwood in 1997, it has sought to engage ASIC in a process of consultation. However, ASIC has sometimes been less than forthcoming. For example, Verus was not provided with a full copy of ASIC's policy statement when, on 2 November 2000 (T52), ASIC informed Verus that it was minded to review the decision of 30 June. Even with the variation decision dated 9 March 2001, it was necessary for Verus to request a fuller statement of reasons in order to understand the decision (T66). Mr Amour noted that when he sent ASIC Verus' response dated 23 November 200 (T55), he also phoned Ed Goodwin at ASIC to ask if there was anything else that he needed to address. Mr Goodwin said he would call him, if this was necessary. Yet, a week later, questions were raised about Benwood's situation in an internal memo dated 30 November 2000 (T 56). Mr Goodwin had also told him on the phone that he did not have any specialist knowledge of the property industry. Mr Amour noted that, effectively, a decision to vary the original decision of 30 June 2000 appears to have been made on 30 November 2000, yet there was no contact between Verus and ASIC until 9 March 2001. Mr Amour also noted that in a letter to Perpetual dated 16 October 2000 (T46), Peter Hewitt of ASIC stated that ASIC had not taken into account that a corporatisation of Benwood had been proposed when granting the initial extension to 30 June 2003.
Mr Amour said that the current dispute could have been avoided had ASIC contacted Verus to discuss the implications of a variation of the original decision in the period immediately after 30 November 2000. However, this did not happen. He noted ASIC's admission in its letter dated 21 March 2001 (T66), that it had erred in granting the extension until 30 June 2003. Mr Amour contended it not err and that this decision was the correct decision to have made.
Mr McGrath addressed various legal issues arising out of the matter. Firstly, he contended that the Respondent, while empowered to extend the transition period under s 1454(2), was not empowered to then reduce that period. Thus, Mr McGrath contended that the decision of 9 March 2001 was ultra vires. He submitted that s 109ZB and s 601QA, which permit the variation of orders in particular circumstances, do not apply in this case. Mr McGrath said Benwood is proceeding towards a winding up, with winding up to commence on 1 January 2003 and to be completed by 30 June 2003. It was never contemplated that ASIC's power could be exercised retrospectively with the effect of outlawing particular activity and putting an undertaking into default.
Secondly, Mr McGrath contended that there had been a denial of natural justice, in so far as Verus had not been given the opportunity to sight relevant submissions and correspondence, nor to discuss with ASIC the potential impact of what it was proposing before it finalised its decision. Verus was left with the impression that it had answered the November 2000 queries satisfactorily.
Thirdly, Mr McGrath contended that ASIC had made errors of law in failing to take into account relevant considerations, for example the impact of the varied extension on Benwood's loan facility with the potential for this being treated as a default which would give rise to the appointment of a receiver by Suncorp Metway. ASIC failed to consider the prospective loss of value in Benwood's assets should a receiver be appointed and the likely reduction in the value of units in Benwood. Mr McGrath also contended that ASIC's perception of Benwood's business was incorrect. Benwood is not in the business of "development": it is merely undertaking the sub-division of its land through pursuing the normal approval process and sale of the individual lots. Benwood is not a property developer in the ordinary sense.
Mr McGrath submitted that the meeting of Benwood unit-holders held on 29 June 2000 could be considered compliant with s 1457(1). He said no "single responsible entity" was put up at that meeting because one could not be found at that time. He contended there was no point in holding an additional meeting after 29 June 2000 given that Benwood will, in any event, terminate in 2003, with the winding up commencing on 1 January 2003. However, even if a further s 1457(1) meeting were to be held, realistically no responsible entity would want to undertake this role with a view to winding up by 30 June 2003. In summary, nothing would be achieved by the holding of such a meeting, the costs of organising the meeting would be significant, and serious consequences might ensue in terms of the relationship with Suncorp Metway with the possibility of Benwood being put into receivership. Mr McGrath said that ASIC had not fully thought through the consequences of its action and should have discussed this with Benwood.
Mr McGrath said that the Suncorp Metway finance facility is fully repayable in December 2002, i.e. before the date of commencement of winding up on 1 January 2003. At the end of September 2001, Benwood will have drawn on this facility to the extent of $1.1 million dollars.
RESPONDENT'S SUBMISSIONS
Mr Moore, for ASIC, said the key feature of the amendments introduced by the Managed Investments Act 1998 was greater protection for investors who contribute money to managed investment schemes. The Act introduced the concept of the single responsible entity in relation to the management of these schemes. The move to a single responsible entity meant, in practice, that either the Trustee or the Manager of the prescribed interest scheme would ordinarily retire, and such retirement would be by way of notice within one year of 1 July 1998. If this did not occur, then s 1457(1) set out the procedure which should be followed. It was recognised that some costs would be involved in the transition to the new regime. Nevertheless, all prescribed interest schemes were required to transfer to the new regime and to comply with the law. A transition period of two years from 1 July 1998 was included in the legislation but, pursuant to s 1454(2), provision was made for extending this transition period in certain circumstances.
Mr Moore noted that ASIC's power to grant an extension of the transition period under s 1454(2) is a discretionary one. Guidance in the exercise of this discretion is provided in ASIC's Policy Statement 135, Managed Investments Transitional Issues ("PS 135"). He said that in exercising this discretion, ASIC's primary focus should be the protection of the unit-holder.
Mr Moore said at the time the extension was granted on 30 June 2000, it appeared to ASIC that the corporatisation of Benwood would take place soon after 30 June 2000 and that the corporatisation would have the same effect as if the scheme was wound up. Verus had indicated that two major unit-holders, holding approximately 50% of issued units in Benwood, would vote in favour of corporatisation. ASIC applied its policy in relation to schemes to be wound up shortly after transition (PS 135.20) in granting an extension of the transition period. However, ASIC admits that it should have granted an extension of one year and not three years under this policy. It therefore erred in the application of its policy.
Under its policy relating to property trusts and syndicates (PS 135.16), ASIC may give an extension for up to three years for certain property trusts or syndicates. However, relief under this head is limited to schemes where a development is complete and the responsible entity would only have limited operating functions because the main income from the scheme is rent. The discretion may not be exercised under this head if the responsible entity would be involved in taking an active management role. Mr Moore contended that the discretion could not be exercised in favour of Benwood under this head because Verus was an active property manager involved in the sub-division of the land, the gaining of approvals for sub-division, engaging in discussions with the Australian Stock Exchange and others, and being involved in the decision-making with regard to marketing and sale of the sub-divided land. Mr Moore said that a large and complex development was involved comprising two stages.

Mr Moore noted that had Benwood not obtained an extension to the transition period by 30 June 2000, it would have been operating illegally. There was, therefore, pressure on the parties to resolve the application for the extension by that date. Mr Moore said the meeting of Benwood unit-holders held on 29 June 2000, was not a meeting held pursuant to s 1457(2). Essentially, the meeting resolved on a conversion to a fixed term trust. ASIC was under the impression that Benwood would be corporatised soon after 30 June 2000, although he acknowledged that ASIC may have misunderstood the timetable being proposed.
On 25 August 2000, Perpetual advised ASIC that Verus did not intend to proceed with corporatisation of Benwood and, by letter dated 22 September 2000, Verus advised ASIC that corporatisation had been deferred. By letter dated 2 November 2000, ASIC advised Verus that it would review the extension granted. Verus responded by letter dated 23 November 2000 and, on 9 March 2001, ASIC varied the extension by reducing its term to a period ending on 30 September 2001. Mr Moore was unable to explain the delay in the notification of ASIC's decision until 9 March 2001. There was apparently no action on the file between 18 December 2000 and 9 March 2001.
Mr Moore said that the holding of a meeting under s 1457(1) is a mandatory requirement, so that if neither the Trustee nor the Manager gives a retirement notice during the first year after 1 July 1998, then a meeting must be held as soon as is practicable after 1 July 1999. No such meeting had been held in the case of Benwood, and it is important that Benwood now comply with this requirement. It is the crux of ASIC's concern that this meeting should be held as soon as possible in order to protect the interests of the unit-holders. Mr Moore submitted that such a meeting could be organised within six weeks and Verus, if it chose, could apply to be registered as a single responsible entity. Even if Verus' application for registration had not been completed at the time that such a meeting was held, this would not prevent the meeting going ahead.

With regard to ASIC's power to vary the original order dated 30 June 2000, Mr Moore argued that this might be exercised pursuant to s 109ZB or s 601QA of the Corporations Law. Section 109ZB(5) states that where the Corporations Law:
confers a power to make, grant or issue any instrument (including rules, regulations or by-laws) the power is, unless the contrary intention appears, taken as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend or vary any such instrument.

Mr Moore contended that s 601QA permits ASIC to revoke, modify or vary the application of provisions of specified chapters of the Corporations Law, including Division 11 of Part 11.2 which sets out the regime for managed investments. Mr Moore said that this provision enabled ASIC to revoke or vary the original instrument granting the extension of the transition period to Benwood.

With regard to Benwood's loan facility with Suncorp Metway, Mr Moore noted that this was entered into on 22 December 2000 well after Verus became aware that ASIC was intending to review the extension of time granted to Benwood of which Benwood was notified by letter dated 9 November 2000. Mr Moore argued that Benwood had not, therefore, relied to its detriment on the extension of time to the transition period continuing until 30 June 2003.
Mr Moore said that the cost of Benwood's transition to a managed investment scheme was, in his opinion, relatively small in terms of the overall value of the land being sub-divided by Benwood. The parties had agreed that the land was valued at $2.34 million as at 29 June 2001.
ASIC Memo of Peter Knight dated 2 November 2000
After the conclusion of the hearing on 4 September 2000, the Tribunal received a faxed copy of an ASIC Memo written by Peter Knight, dated 2 November 2000. This comprises Mr Knight's views "as to the propriety of s 1454(2) relief granted for BPT". In an ASIC memo dated 5 September 2001, Mr Knight stated the memo was probably only a draft in electronic form and doubted it was sent to the ASIC addressee, Ed Goodwin. Apparently, there was previously no paper copy of the Memo in existence.

The Applicant was invited to make a written submission to the Tribunal on the ASIC Memo and Mr Amour did so on 12 September 2001. He drew attention to a number of statements in the Memo that he said supported the Applicant's case. In particular, he drew attention to the following statement by Mr Knight:
The relief granted to BPT on 30 June 2003, was granted on the basis that BPT had converted to a fixed term trust on 29 June 2000 and the understanding that it would be wound up or "corporatised" by 30 June 2003. Thus, the "winding up soon after 30 June 2000" criterion was not intended to be met

Mr Amour also drew attention to a comment by Mr Knight who noted the Manager's view that the corporatisation of Benwood was the outcome which was in the best interests of the unit-holders, rather than conversion to a managed investment scheme. Mr Knight stated:
Apparently, this is the criterion that was predominantly taken into account when the relief was granted, while the operational status of BPT may have been overlooked.

FINDINGS OF FACT

There is no dispute that Verus applied to ASIC for relief from the requirement under Chapter 5C of the Corporations Law by letter dated 9 May 2000 (T8). By letter dated 1 June 2000, Verus' solicitors amended the request for relief by seeking an extension of the transition period for a period of three years pursuant to s 1454(2). That letter referred to the amended proposal "to convert the Trust to a fixed term Trust and to undertake the corporatisation within a three year period" (T16). On 29 June 2000, Benwood's unit-holders passed a resolution approving a supplementary trust deed to convert Benwood to a fixed term property trust terminating on 30 June 2003 (T23). On 30 June 2000, ASIC issued an instrument extending the transition period for compliance until 30 June 2003 (T33). The Tribunal finds that the decision made by ASIC to issue this instrument was based on a full disclosure by Verus acting on behalf of Benwood. In the Tribunal's view, if ASIC's decision of 30 June 2000 was incorrect, this was a result of their own misconception of the facts concerning Benwood. Mr Knight's ASIC Memo of 2 November 2000 confirms this.
In late August 2000, ASIC was contacted by Perpetual who advised that Verus would not be proceeding with the corporatisation of Benwood (T38). There followed communication between ASIC officers as to the import of this information. The Tribunal notes an internal memorandum from Ed Goodwin to Peter Hewitt dated 4 September 2000 in which Mr Goodwin states "there is no evidence that the proposed corporatisation was taken into account by ASIC in deciding whether to grant the PF 174 relief. This is contrary to Mr Knight's ASIC Memo of 2 November 2000. On 7 September 2000, ASIC wrote to Benwood's solicitors raising various questions including those relating to the corporatisation proposal (T40) Verus' solicitors then referred the matter to Verus. Mr Amour wrote to ASIC on 22 September 2000 addressing the questions raised by ASIC (T44). Mr Amour stated:
I confirm that it is our firm intention to either corporatise (or possibly even to migrate to the provisions of the Managed Investments Act) within the period set out by yourselves for the extension of the Trust's status.
On 16 October 2000, ASIC wrote to Perpetual in response to Perpetual's query about corporatisation raised in August 2000. ASIC stated in its letter:
ASIC was aware on 30 June 2000 when the Pro Forma 174 Relief was issued in respect of the Trust that a corporatisation had been proposed. However, ASIC did not take this into account when issuing the relief.

Then, on 27 October 2000 in an internal ASIC memo, Peter Hewitt stated:

If the unit-holders do not approve the proposed corporatisation of the Trust before 30 June 2003 the [sic] the Trust must either be terminated or registered as a managed investment scheme. It would appear that the interests of unit-holders are sufficiently protected under these circumstances.

Peter Hewitt also noted:
The units in the Benwood Property Trust may be more saleable now than they were when the relief was given, but I don't see this as a reason why ASIC should now revoke the relief.

On 2 November 2000, ASIC wrote to Verus stating that it was "now minded to review the relief it granted" on 30 June 2000 (T52). ASIC raised various issues which Verus responded to in a letter dated 23 November 2000 (T54). The Tribunal accepts Mr Amour's evidence that he spoke to Mr Goodwin after faxing this letter and Mr Goodwin agreed to contact Mr Amour if the letter gave rise to other issues which need clarification. After sending this letter, Verus heard nothing more from ASIC until receiving ASIC's letter of 9 March 2001 (T59), a period of approximately 3 and a half months. An internal ASIC memo of 30 November 2000 (T56), indicates internal ASIC agreement that the instrument dated 30 June should be revoked and replaced with an instrument giving relief until 30 June 2001. The file then shows email communication between ASIC officers on 11 and 12 December 2000 (T57) and an internal memo dated 18 December 2000 (T58). There is then a gap in the file documentation between 18 December 2000 and 9 March 2001 when the decision to vary the instrument dated 30 June 2000 was notified to Verus. No explanation has been given for this delay of over 11 weeks.
In the Tribunal's view, based on the evidence of Mr Amour and Mr McGrath, the variation of the instrument dated 30 June 2000 was likely to have a significant effect on the operation of Benwood. The Tribunal finds that the sub-division of its land at High Wycombe, Perth has made substantial progress, facilitated by loan finance from Suncorp Metway. The Tribunal accepts that ASIC's decision dated 9 March 2001 could lead to consequences resulting in a technical default under the terms of the Suncorp Metway Loan Agreement resulting in all outstanding moneys becoming immediately repayable. This in turn might give rise to a fire sale of Benwood's assets which the Tribunal finds would be likely to be detrimental to the interests of Benwood's unit-holders.
While Benwood may not have complied with the s 1457(1) requirement to convene a meeting, the Tribunal is not persuaded that the Benwood unit-holders have suffered or are likely to suffer a detriment as a result of that lack of compliance. Nor is there any evidence that they would suffer a detriment if the original instrument dated 30 June 2000 were reinstated.
APPLICATION OF THE LAW
After the conclusion of the parties oral submissions at the hearing, the Tribunal invited the parties to discuss the possibility of a compromise being reached before the Tribunal made a decision. The parties did so, but no compromise was forthcoming. Although not stated at the time, the reason for the Tribunal issuing this invitation was its concern that there had been inadequate communication between the parties, particularly a failure of communication on the part of ASIC. The Tribunal's view is that ASIC has been heavy-handed in its approach to this matter, against a background of its own mistake having been primarily responsible for any incorrect application of policy in its decision dated 30 June 2000, and there being no evidence of any direct detriment being caused to the Benwood unit-holders, the protection of whose interests the ASIC officers stated to be their principal focus during the course of the hearing.
The focus for the Tribunal is a review of the ASIC decision dated 9 March 2001 to vary the instrument of 30 June 2000 by reducing the period by which the transition period of two years was extended, from 30 June 2003 to 30 September 2001. This decision was made pursuant to s 1454(2). The Tribunal accepts ASIC's submission that s 109ZB enables ASIC to repeal, rescind, revoke, amend or vary the instrument by which an extension of time was granted under s 1454(2).
The power to grant an extension under s 1457(2) is a discretionary one. ASIC has published a policy statement to guide decision-makers in exercising their discretion under this section and to provide information to the public about how such a discretion is exercised. The Tribunal acknowledges that it should have regard to relevant policy in making its decision. As Brennan J recognised in Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 (at 640 –641), there are powerful considerations in favour of adopting a policy for the guidance of decision-makers. The policy can diminish inconsistencies which might otherwise appear in a series of decisions and enhance fairness and continuity within the administrative process. However, each case must be decided on its merits, and a policy which precludes consideration of the merits of a case is considered objectionable as a fetter on the exercise of the discretion.
The Tribunal notes the following relevant paragraphs of ASIC's policy statement with regard to extensions of time:
135.3 - We will give you relief so that the transitional period is extended under section 454 (2). Relief will be on a case by case basis following Pro Forma 174 [PF 174]. We will give relief when both the following criteria are satisfied:
(a)the Scheme is certain to terminate at a particular time after 30 June 2000 that the approved Deed does not allow the parties to the Scheme to change; and
(b) it would be unreasonable for the Scheme to be required to be registered.

135.10 – Schemes will only be given extensions of the transitional period when it is clear that the cost of registering is disproportionate to the benefits to prescribed interest holders. When deciding whether or not to give relief we will also consider the future difficulties of continuing to administer the Law as it existed before 1 July 1998.

135.16 – When a responsible entity would have only a limited role, requiring registration may be unreasonable. We will initially give an extension of up to three years after the standard two year transitional period for property trusts or syndicates relying on fixed term relief given under Policy Statement 77 Property Trusts and Property Syndicates [PS 77]. These types of schemes have only limited operating functions because the property is held for the duration of the scheme and the income is rent. If the development of the property is not complete when an extension of time is requested, we will not give relief.
135.20 – We will extend the transitional period when a scheme is to be wound up within one year after the standard two year transitional period ends. If we did not give this extension, the cost of registering would be unreasonable, due to the short period when the managed investment provisions of the Law would give protection.

ASIC has focused on exercise of the discretion under PS 135.16 and PS 135.20. The Tribunal accepts that the role taken by Benwood in the sub-division and sale of its land at High Wycombe involves more than the limited operating functions anticipated by PS 135.16. That paragraph of ASIC's policy does not, therefore seem to be applicable. With regard to PS 135.20, it is clear that this anticipates a winding up of a scheme within one year after the end of the standard two year transitional period. Since ASIC should have been aware, since at least early June, that Benwood was proposing possible corporatisation within the three year period ending 30 June 2003, clearly PS 135.20 also did not apply.
Even if ASIC's decision of 30 June 2000 was not in accordance with PS 135.16 or PS 135.20, this should not in the Tribunal's view have lead ASIC to make a decision on 9 March 2001, without giving proper consideration to any detriment suffered by Benwood or its unit-holders as a result of the variation of the original decision of 30 June 2000. As it was noted by Brennan J in Drake (supra), a discretion involves the consideration of the individual circumstances of a particular matter. In the Tribunal's view, in making its variation decision on 9 March 2001, ASIC failed to do this. The decision of 9 March 2001 should, therefore, be set aside .
Having set aside the decision under review, the Tribunal must, pursuant to s 43 (i) of the Administrative Appeals Tribunal Act 1975, either (i) make a decision in substitution for the decision set aside, or (ii) remit the matter for reconsideration in accordance with any directions or recommendations of the Tribunal. The Tribunal notes that at Benwood unit-holders' meeting on 29 June 2000, a supplementary Deed was approved by which amendments were made to the principal deed under which Benwood was established. In particular, the supplementary deed provided for a termination date for Benwood of 30 June 2003, and for the winding up of Benwood to commence on 1 January 2003 (T20). Given that the period between the time of the hearing and 1 January 2003 is approximately 15 months, and the need for a resolution of the dispute between the parties as soon as possible to enable Benwood to proceed with the sub-division and sale of its land, the Tribunal considers that the most practical solution is to reinstate the original decision dated 30 June 2000. The Tribunal had regard, on the one hand, to the position of Benwood's unit-holders and the need to protect their interests and, on the other hand, to ensure that its decision is not detrimental to their interests. In the Tribunal's opinion, there is no evidence that the interests of the unit-holders would be adversely affected by the reinstatement of the 30 June 2000 decision.
With regard to s 1457 and the requirement to hold a meeting as soon as practicable after the end of the first year from the commencement of the Managed Investment Act amendments to the Corporations Law, ie. after 30 June 1999, it seems to the Tribunal that the Benwood unit-holders meeting of 29 June 2000 should be treated as being such a meeting given that, at the meeting, the unit-holders approved a supplementary deed to the original Trust Deed for Benwood which included an amendment to the termination date for the Trust from 1 January 2050 to 30 June 2003, with the winding up to commence on 1 January 2003 (T20).
COSTS
Mr McGrath, for the Applicant, submitted that the Tribunal has the power to award costs in this matter under s 1335(2) of the Corporations Act 2001, which provides:
(2) The costs of any proceeding before a court under this Act is to be borne by such party to the proceeding as the court, in its discretion, directs.

A 'court' is defined in s 58AA as follows:
(1)      Subject to subsection (2), in this Act
"court" means any court.
"Court" means any of the following courts:
(a)      the Federal Court;
(b)      the Supreme Court of a State or Territory;
(c)      the Family Court of Australia;
(d)      a court to which section 41 of the Family Law Act 1975 applies because of a Proclamation made under subsection 41(2) of that Act.
(2)      Except where there is a clear expression of a contrary intention (for example, by use of the expression "the Court"), proceedings in relation to a matter under this Act may, subject to Part 9.7, be brought in any court.

Mr McGrath submitted that the Tribunal is a 'court' in accordance with the general meaning of that term and in accordance with certain definitions in the Australian Securities and Investments Commission Act 2001.

Generally, the Tribunal does not have the power to award costs except in certain proceedings in the Security Appeals Division of the Tribunal and under the Safety, Rehabilitation and Compensation Act 1988, the Seafarers Rehabilitation and Compensation Act 1992, the Mutual Recognition Act 1992, the Lands Acquisition Act 1989 (see s 69B of the Administrative Appeals Tribunal Act 1975 and the AAT General Practice Direction).

The Tribunal's jurisdiction in corporations matters is set out in Part 9.4A of the Corporations Act 2001. Part 9.4 provides that "an application may be made to the Tribunal for review of a decision": s 1317B. Certain decisions are excluded from the review by the Tribunal: s 1317C. The Part does not refer to the Tribunal's power to award costs, nor does it refer to matters before the Tribunal as 'proceedings'.
The power to award costs is set out in a separate part of the Act - 'Part 9.6: Proceedings'. This Part also refers to matters which are not usually connected with administrative review, such as 'civil proceedings': s 1331; standard of proof for a Court: s 1332; and contravention of laws: s 1333. The structure of the Act suggests that these 'proceedings' refer to court proceedings, not applications for review before the Tribunal. This is reinforced by s 58AA(2) which states that "proceedings in relation to a matter under this Act may, subject to Part 9.7, be brought in any court". The Tribunal's jurisdiction, however, does not cover all matters under the Act. Its jurisdiction is limited by ss1317B and 1317C.

The Applicant referred to certain definitions in the Australian Securities and Investments Commission Act 2001. However, those definitions are confined to the operation of that Act. Another argument against the Tribunal awarding costs, is that it would be inappropriate for the Tribunal to award costs, unless this is explicitly provided for by the relevant legislation. Awarding costs has the potential to reduce informality in the Tribunal's administrative proceedings and disadvantage parties who are not legally represented. As the Administrative Review Council noted in its Eleventh Annual Report (1986-87) at 80:
it is inappropriate for the award of costs, which is an incident of civil proceedings before the Courts of law, to be applied in relation to administrative proceedings before the AAT
The Tribunal therefore concluded that it did not have power to award costs in this matter.
I certify that the 58 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R P Handley, Deputy President
Signed:         .....................................................................................
  Associate
Date/s of Hearing:  3 September 2001
Date of Decision  16 October 2001
Representatives for the Applicant:           Mr M Amour, Mr K McGrath
Solicitor for the Respondent:   Mr A Moore, ASIC